Innovative UK broadcasters mean Netflix is unlikely to be the future of British TV

The future shape and nature of TV is, unsurprisingly, a constant topic of discussion in media and technology circles.

Twenty years ago it was claimed that the arrival of multi-channel TV would deliver a wealth of niche, specialist channels which would overwhelm the traditional broadcasters and draw audiences away with a menu of highly targeted content.

It failed to happen.

Instead traditional broadcasters such as ITV, Channel 4 and the BBC responded to the threat by launching their own digital channels.

In 1996 Granada teamed up with Sky to launch Granada Sky Broadcasting which offered Granada Plus, Granada Breeze and Men & Motors.

The BBC used its commercial arm to partner with former ITV franchise holder Thames Television to launch UK Gold. From that single channel sprang UKTV, which today operates Alibi, Dave, Watch, Really, Good Food, Eden, Gold, Home, Yesterday and Drama.

And, although it responded later than ITV and the BBC, Channel 4 launched FilmFour in 1998 and E4 in 2001.

The occupation of this new multichannel land by the traditional broadcasters meant that, beyond the success of Sky 1, the promised revolution largely failed to materialise because there was little room in audiences’ attention for unknown newcomers.

Today BBC 1 and ITV remain the UK’s most watched channels and, while audiences are down, those who are watching another channel are likely to be watching the broadcasters’ digital spin-off channels.

“In 2007 the aggregated viewing share of the five main PSB channels stood at 64%; this declined to 52% in 2012, a 12% point decrease. However, this decline is offset by an increase in viewing to their digital portfolio channels, with aggregated viewing almost doubling from 12% in 2007 to 21% in 2012.”

Undeterred by the wrongness of their predictions, the media and tech talking heads moved on to predict that everyone would soon be watching TV on YouTube, the new creative frontier where thrusting and budding programme makers would upload their own hit content for the masses to discover and lap up.

As with the dot.com boom before it, no-one bothered to ask how this content would be monetised, or even how the high quality productions expected by audiences would be funded.

I was never convinced – though I once claimed online grocery shopping would never take-off and look at how that worked out – that the majority of audiences were anywhere near ready to flock online and look for content rather than have it neatly served up to them at a publicised time.

Not only was there no tangible sign of the needed change of mindset, but the UK’s internet infrastructure was no where near ready to support intensive online viewing.

That last point still remains true today.

According to Ofcom, as of June 2013 59% of broadband customers had speeds less than 10Mbit/s while 8% of all UK homes were getting by on less than 2Mbit/s.

Those 8% aren’t going to be streaming or downloading much video content.

It’s true that video downloading is increasing in the UK with this activity now accounting for “approximately half of all internet traffic” but while YouTube appears in Ofcom’s list of top sources of content, it sits alongside the BBC’s iPlayer and Sky’s various download services.

So, once again, the established names have largely blocked out the threat posed by emerging technologies and retained their audiences.

This is something British broadcasters have repeatedly proven very good at doing – the BBC’s been doing it ever since ITV launched and broke its monopoly on the nation’s screens – yet still the predictions of their decline continue.

The latest fashion is to talk up services such as Netflix as the future of TV.

Some of this comes from the company’s expansive PR operation but much of it stems from the slavish reporting of American trends and analyst and media efforts to shoe-horn them into relevance for the UK market.

In the US the talk is, as it has long been, about ‘cord-cutting’ – the freeing of hard-working Americans from the need to pay high cable bills in order to watch the most popular shows.

This is what lays behind talk of an Apple TV, the TV features in Microsoft’s new Xbox One and Netflix and Amazon’s recent investment in new, first run shows.

But cord-cutting is a concept that doesn’t apply to the UK where 39% of homes watch the non-subscription Freeview – which, as their ads tell us, offers 95% of the UK’s most popular shows – on their main TV.

The first is that much-heralded shows such as the remake of BBC drama House of Cards would have happened regardless of Netflix’s cash.

The show was masterminded by The Social Network Director David Fincher and shopped around a number of outlets, including Netflix who offered more cash than their rivals for the first run rights.

Netflix didn’t, despite the widespread belief to the contrary, invent, imagine or go out and film House of Cards. It simply bought the rights to show the series before anyone else.

There’s nothing magical about what happened.

Netflix’s acquisition of the show was just another transaction of the type that happens every day in TV – it’s no different to the deal which saw Channel 4 snapping up the rights to Marvel’s Agents of Shield or Sky buying The Blacklist.

Just 5 months after debuting House of Cards, Netflix ceased to be the exclusive source for the show when Sony, under licence from the rights holders, released it on DVD and Blu-ray.

When this is pointed out to advocates of ‘streaming is the future’ they point to the Netflix model of putting all episodes online at the same time as a key differentiator between it and traditional broadcast networks.

This assumes firstly that this model will always be used – what if Netflix discovered most views of a new series came from people on a free trial who never went on to pay? – and ignores that broadcasters could easily replicate it.

Sky already debuts the first episodes of shows such as Blue Bloods on its download services ahead of broadcast, if it felt there was commercial gain in doing so there’s nothing to prevent them agreeing rights to making the whole series available at once for those who wanted to binge watch.

One of the biggest obstacles to Netflix – or Lovefilm – replacing or even matching established broadcasters in scale and importance is the affordability of content.

US investment website The Motley Fool has previously explained how the costs of acquiring first run rights to shows means Netflix will always depend on other content originators for much of their library and why that library contains so much older (and, for Netflix, cheaper) content.

To which we can add the fact that the ‘boxsets on demand’ nature of Netflix has already been copied by Sky, BT and TalkTalk who all offer similar services at wallet-friendly prices.

Even better for viewers, Channel 4 makes whole seasons of shows such as The Inbetweeners and deep archive hits like Queer As Folk available for free via 4oD.

And British broadcasters haven’t stopped innovating – Sky has made its premium TV content available on demand for just £4.99 per month and is offering a monthly pass to the latest Hollywood films for just £8.99.

To have any chance of establishing itself as a real part of the UK TV landscape, Netflix would need to invest in high quality, original British drama – reviving old US sitcoms such as Arrested Development isn’t going to excite the masses here.

Yet the returns on such local investment are unlikely to be as great as from content developed for its larger US subscriber base.

All of which means the firm faces far more of a challenge in the UK then the gushing media coverage it enjoys tends to suggest.

My money is on the dynamic, innovative and highly competitive British broadcasters continuing to shape the TV landscape for many years to come.